Correlation Between Waterstone Financial and First Financial
Can any of the company-specific risk be diversified away by investing in both Waterstone Financial and First Financial at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Waterstone Financial and First Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Waterstone Financial and First Financial Northwest, you can compare the effects of market volatilities on Waterstone Financial and First Financial and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Waterstone Financial with a short position of First Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Waterstone Financial and First Financial.
Diversification Opportunities for Waterstone Financial and First Financial
-0.05 | Correlation Coefficient |
Good diversification
The 3 months correlation between Waterstone and First is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Waterstone Financial and First Financial Northwest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Financial Northwest and Waterstone Financial is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Waterstone Financial are associated (or correlated) with First Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Financial Northwest has no effect on the direction of Waterstone Financial i.e., Waterstone Financial and First Financial go up and down completely randomly.
Pair Corralation between Waterstone Financial and First Financial
Given the investment horizon of 90 days Waterstone Financial is expected to generate 3.45 times less return on investment than First Financial. But when comparing it to its historical volatility, Waterstone Financial is 1.51 times less risky than First Financial. It trades about 0.04 of its potential returns per unit of risk. First Financial Northwest is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 1,331 in First Financial Northwest on August 25, 2024 and sell it today you would earn a total of 916.00 from holding First Financial Northwest or generate 68.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Waterstone Financial vs. First Financial Northwest
Performance |
| Timeline |
| Waterstone Financial |
| First Financial Northwest |
Waterstone Financial and First Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Waterstone Financial and First Financial
The main advantage of trading using opposite Waterstone Financial and First Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Waterstone Financial position performs unexpectedly, First Financial can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in First Financial will offset losses from the drop in First Financial's long position.| Waterstone Financial vs. National Bank Holdings | Waterstone Financial vs. Community West Bancshares | Waterstone Financial vs. Financial Institutions | Waterstone Financial vs. Kearny Financial Corp |
| First Financial vs. Fifth Third Bancorp | First Financial vs. Zions Bancorporation | First Financial vs. Huntington Bancshares Incorporated | First Financial vs. PNC Financial Services |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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